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Why Is Verizon (VZ) Up 6.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for Verizon Communications (VZ - Free Report) . Shares have added about 6.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Verizon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Verizon Beats Q2 Earnings on Healthy Top-Line Growth
Verizon continued its solid performance in second-quarter 2018, primarily led by the wireless business. The company recorded healthy top-line growth led by solid service revenues. The bottom line also benefited from significant savings from the tax reform.
Quarter Details
GAAP earnings for the reported quarter were $4,246 million or $1.00 per share compared with $4,478 million or $1.07 per share in the year-ago quarter. The year-over-year decrease in GAAP earnings despite higher revenues was largely attributable to higher operating expenses. Excluding non-recurring items, adjusted earnings were $1.20 per share compared with 96 cents in the year-earlier quarter and comfortably exceeded the Zacks Consensus Estimate of $1.14.
Consolidated GAAP revenues increased 5.4% year over year to $32,203 million on the back of a solid performance in the wireless business and exceeded the Zacks Consensus Estimate of $31,718 million. Operating income declined 17.4% year over year to $6,617 million on higher operating expenses.
Segment Performance: Wireless
Total revenues from this segment were $22,449 million, up 5.5% year over year. While service revenues improved 0.8% to $15,754 million, that from equipment increased 17.4% to $5,044 million. Other revenues totaled $1,651 million, up 21.2% year over year.
Operating income improved 11.7% to $8,274 million due to higher retail postpaid connections. Quarterly operating income margin was 36.9% compared with 34.8% in the year-ago quarter. Segment EBITDA increased 10% to $10,733 million, resulting in EBITDA margin of 47.8% compared with respective tallies of $9,757 million and 45.8% in the prior-year quarter.
Verizon reported a net increase of 531,000 retail postpaid connections in second-quarter 2018. Quarterly retail postpaid churn rate marginally increased to 0.97% from 0.94% in the year-ago quarter. Retail postpaid ARPA (average revenue per account) was $134.56 compared with $134.89 in the year-ago quarter.
Wireline Segment
Total revenues in the segment were $7,459 million, down 3.4% year over year owing to lower Business Markets revenues (down 7.4% to $850 million) and Enterprise Solutions (down 4.2% to $2,211 million). Partner Solutions revenues also decreased 2.8% to $1,200 million, while Consumer retail revenues declined 1.6% to $3,132 million. Other revenues were down 9.6% to $66 million.
Although Verizon added a net of 43,000 Fios Internet connections due to strong demand for value broadband connections, it lost 37,000 Fios Video connections amid pressures from cord-cutting of video bundles.
Quarterly operating loss was $19 million, against operating income of $47 million in the year-ago quarter. Segment EBITDA fell 5.6% to $1,505 million for EBITDA margin of 20.2% compared with 20.7% in the year-ago quarter.
Cash Flow and Liquidity
Verizon generated $16,433 million of cash from operating activities for the first six months of 2018 compared with $9,306 million in the year-ago period. At the end of the reported quarter, Verizon had $1,750 million of cash and cash equivalents and $109,174 million in long-term debts.
Outlook Reiterated
For full-year 2018, Verizon reiterated its earlier guidance and continues to expect both GAAP revenues and adjusted earnings per share to increase by low single-digit percentage rates driven by expected savings from tax reform and higher cash flow from operations. Capital expenditures for 2018 are likely to be in the range of $17.0 billion to $17.8 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Verizon has an average Growth Score of C, however its momentum is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and to a lesser degree growth.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Verizon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Verizon (VZ) Up 6.3% Since Last Earnings Report?
A month has gone by since the last earnings report for Verizon Communications (VZ - Free Report) . Shares have added about 6.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Verizon due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Verizon Beats Q2 Earnings on Healthy Top-Line Growth
Verizon continued its solid performance in second-quarter 2018, primarily led by the wireless business. The company recorded healthy top-line growth led by solid service revenues. The bottom line also benefited from significant savings from the tax reform.
Quarter Details
GAAP earnings for the reported quarter were $4,246 million or $1.00 per share compared with $4,478 million or $1.07 per share in the year-ago quarter. The year-over-year decrease in GAAP earnings despite higher revenues was largely attributable to higher operating expenses. Excluding non-recurring items, adjusted earnings were $1.20 per share compared with 96 cents in the year-earlier quarter and comfortably exceeded the Zacks Consensus Estimate of $1.14.
Consolidated GAAP revenues increased 5.4% year over year to $32,203 million on the back of a solid performance in the wireless business and exceeded the Zacks Consensus Estimate of $31,718 million. Operating income declined 17.4% year over year to $6,617 million on higher operating expenses.
Segment Performance: Wireless
Total revenues from this segment were $22,449 million, up 5.5% year over year. While service revenues improved 0.8% to $15,754 million, that from equipment increased 17.4% to $5,044 million. Other revenues totaled $1,651 million, up 21.2% year over year.
Operating income improved 11.7% to $8,274 million due to higher retail postpaid connections. Quarterly operating income margin was 36.9% compared with 34.8% in the year-ago quarter. Segment EBITDA increased 10% to $10,733 million, resulting in EBITDA margin of 47.8% compared with respective tallies of $9,757 million and 45.8% in the prior-year quarter.
Verizon reported a net increase of 531,000 retail postpaid connections in second-quarter 2018. Quarterly retail postpaid churn rate marginally increased to 0.97% from 0.94% in the year-ago quarter. Retail postpaid ARPA (average revenue per account) was $134.56 compared with $134.89 in the year-ago quarter.
Wireline Segment
Total revenues in the segment were $7,459 million, down 3.4% year over year owing to lower Business Markets revenues (down 7.4% to $850 million) and Enterprise Solutions (down 4.2% to $2,211 million). Partner Solutions revenues also decreased 2.8% to $1,200 million, while Consumer retail revenues declined 1.6% to $3,132 million. Other revenues were down 9.6% to $66 million.
Although Verizon added a net of 43,000 Fios Internet connections due to strong demand for value broadband connections, it lost 37,000 Fios Video connections amid pressures from cord-cutting of video bundles.
Quarterly operating loss was $19 million, against operating income of $47 million in the year-ago quarter. Segment EBITDA fell 5.6% to $1,505 million for EBITDA margin of 20.2% compared with 20.7% in the year-ago quarter.
Cash Flow and Liquidity
Verizon generated $16,433 million of cash from operating activities for the first six months of 2018 compared with $9,306 million in the year-ago period. At the end of the reported quarter, Verizon had $1,750 million of cash and cash equivalents and $109,174 million in long-term debts.
Outlook Reiterated
For full-year 2018, Verizon reiterated its earlier guidance and continues to expect both GAAP revenues and adjusted earnings per share to increase by low single-digit percentage rates driven by expected savings from tax reform and higher cash flow from operations. Capital expenditures for 2018 are likely to be in the range of $17.0 billion to $17.8 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
Currently, Verizon has an average Growth Score of C, however its momentum is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for momentum and to a lesser degree growth.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Verizon has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.